Gordon and Lintner, recognizing that dividends affect stock prices, suggest that positive effects of dividend increases are attributable ________.
A) directly to the dividend policy
B) directly to the optimal capital structure
C) not to the informational content but to the consistency in the payment of dividends
D) to the informational content of the dividends with respect to future earnings

Question

Quizplus · Accepted Answer

Gordon and Lintner argued that dividends convey information about the future earnings of the firm. As a result, positive effects of dividend increases are due to the informational content of the dividends with respect to future earnings.

Gordon and Lintner, Recognizing That Dividends Affect Stock Prices, Suggest